AMERESCO, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the year endedDecember 31, 2021 included in our Annual Report on Form 10-K ("2021 Form 10-K") for the year endedDecember 31, 2021 filed onMarch 1, 2022 with theU.S. Securities and Exchange Commission ("SEC"). This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward looking statements include statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management, expected market growth and other characterizations of future events or circumstances. All statements, other than statements of historical fact, including statements that refer to our expectations as to the future growth of our business and associated expenses; our expectations as to revenue generation; the future availability of borrowings under our revolving credit facility; the expected future growth of the market for energy efficiency and renewable energy solutions; our backlog, awarded projects and recurring revenue and the timing of such matters; our expectations as to acquisition activity; the impact of any restructuring; the uses of future earnings; our intention to repurchase shares of our Class A common stock; the expected energy and cost savings of our projects; the expected energy production capacity of our renewable energy plants; the results of theSEC's investigation into our revenue recognition and compensation practices in our software-as-a-service businesses; the impact of the ongoing COVID-19 pandemic and supply chain disruptions and shortage of materials; our expectations related to our agreement with SCE including the impact of any delays; the impact of theU.S. Department of Commerce's solar panel import investigation and other characterizations of future events or circumstances are forward-looking statements. Forward looking statements are often, but not exclusively, identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," "target," "project," "predict" or "continue," and similar expressions or variations. These forward-looking statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Risks, uncertainties and factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors," set forth in Part I, Item 1A of our 2021 Form 10-K, Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q ("Q1 2022 Form 10-Q"). Subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so and undertake no obligation to do so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q. OverviewAmeresco is a leading clean technology integrator with a comprehensive portfolio of energy efficiency and renewable energy supply solutions. We help organizations meet energy savings and energy management challenges with an integrated comprehensive approach to energy efficiency and renewable energy. Leveraging budget neutral solutions, including energy savings performance contracts ("ESPCs") and power purchase agreements ("PPAs"), we aim to eliminate the financial barriers that traditionally hamper energy efficiency and renewable energy projects. Drawing from decades of experience,Ameresco develops tailored energy management projects for its customers in the commercial, industrial, local, state, and federal government, K-12 education, higher education, healthcare, public housing sectors, and utilities. We provide solutions primarily throughoutNorth America and theU.K. and our revenues are derived principally from energy efficiency projects, which entail the design, engineering, and installation of equipment and other measures that incorporate a range of innovative technology and techniques to improve the efficiency and control the operation of a facility's energy infrastructure; this can include designing and constructing a central plant or cogeneration system for a customer providing power, heat and/or cooling to a building, or other small-scale plant that produces electricity, gas, heat or cooling from renewable sources of energy. We also derive revenue from long-term O&M contracts, energy supply contracts for renewable energy operating assets that we own, integrated-PV, and consulting and enterprise energy management services. In addition to organic growth, strategic acquisitions of complementary businesses and assets have been an important part of our growth enabling us to broaden our service offerings and expand our geographical reach. InDecember 2021 , we completed the acquisition of Plug Smart, anOhio -based energy services company that specializes in the development and implementation of budget neutral capital improvement projects including building controls and building automation systems. This acquisition allowed us to expand our existing pipeline and solution offerings in the smart buildings sector. The pro forma effects of this acquisition were not material to our operations for the fiscal quarters presented. 28
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The Southern California Edison ("SCE") Agreement
InOctober 2021 , we entered into a contract with SCE to design and build three grid scale battery energy storage systems ("BESS") at three sites near existing substation parcels throughout SCE's service territory inCalifornia with an aggregate capacity of 537.5 MW. The engineering, procurement and construction price is approximately$892.0 million , in the aggregate, including two years of O&M revenues, subject to customary potential adjustments for changes in the work. We are obligated under the SCE Agreement to achieve substantial completion of all facilities, subject to extension for specified force majeure events and customer-caused delays, no later thanAugust 1, 2022 (the "Guaranteed Completion Date"). If we fail to meet the Guaranteed Completion Date at any of the facilities, other than as a result of specified force majeure events, we may be required to pay liquidated damages up to an aggregate maximum of$89 million , and under certain circumstances SCE may have a right to terminate the agreement. We have also provided availability and capacity guarantees under the SCE Agreement, failure of which entitles the customer to liquidated damages. As previously disclosed at the end ofMarch 2022 , our battery supplier for the SCE battery storage project indicated that the COVID-19 lockdowns in several regions aroundChina were having an adverse impact on the supplier's ability to deliver batteries on the agreed upon timeline. In addition, the supplier indicated that newly implemented Chinese transportation safety policies may cause delays in the shipment of a portion of the batteries. Following a review of these circumstances, we provided SCE with a force majeure notice under the SCE Agreement as we, at the time of providing the notice, determined that these circumstances may prevent us from fully completing all three BESS projects by theAugust 1, 2022 Guaranteed Completion Date. Considering the impact of these delays with other supply chain and permitting challenges, we now expect 200 to 300 MW of capacity to be in service inSeptember 2022 and we expect to achieve substantial completion for all the projects by the end of 2022. Under the SCE Agreement, the occurrence of force majeure events, including certain COVID-related delays, results in extensions of required completion deadlines without liquidated damages and an increase in the contract price, subject to the party claiming a force majeure event being in compliance with its contractual obligations. We are continuing discussions with SCE regarding the applicability and scope of any force majeure relief relating to these circumstances, and are also actively working with SCE, our suppliers, and governmental agencies to mitigate delays.
We expect a material portion of our revenue for 2022 to be generated from this SCE Agreement.
COVID-19, Supply Chain Disruptions, and Other Global Factors
We continue to monitor the impact of COVID-19 on our operations, financial results, and liquidity. The impact to our future operations and results, however, remains uncertain and will depend on a number of factors, including, but not limited to, the emergence and spread of more transmissible variants, the overall duration and severity of the pandemic, and its impact on the global economy, our customers, and business and workforce disruptions. Infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic that may persist, including challenges and increases in costs for logistics and supply chains, such as increased port congestion, and intermittent supplier delays as well as shortage of certain components needed for our business, such as lithium-ion battery cells for our energy storage products. During the three and six months endedJune 30, 2022 , we experienced supply chain disruptions, including as a result of COVID-19 and macroeconomic conditions, causing delays in the timely delivery of material to customer sites and delays and disruptions in the completion of certain projects, including those pursuant to the SCE Agreement. This negatively impacted our results of operations during the three and six months endedJune 30, 2022 . We expect the trends of supply challenges to continue for the remainder of this year. We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate to address the challenges presented from these conditions. For example, inApril 2022 , we entered into a binding framework agreement term sheet with a battery manufacturer for the purchase and sale of BESS equipment for our BESS projects at committed amounts and agreed upon delivery dates for a period of several years. The purchase and sale commitment covers BESS equipment to be used for our BESS projects and assets. In connection with entering into the term sheet, we paid a$10 million deposit which will be credited against our future equipment purchases. InMarch 2022 , theU.S. Department of Commerce announced that it is investigating if certain solar cell and panel imports fromMalaysia ,Vietnam ,Thailand andCambodia are circumventing anti-dumping and countervailing duty orders. We do not expect that this investigation will have a material impact on our business in the near term, as we have a stockpile of solar panels from a large purchase several years ago. Furthermore, we believe thatPresident Biden's executive order issued inJune 2022 further mitigates this risk. The order authorized theU.S. Secretary of Commerce to implement regulations to shield solar modules and cells imported fromMalaysia ,Vietnam ,Thailand andCambodia from any anti-dumping and countervailing duties for up to 24 months from the issuance of the order. In the longer term, the investigation and any resulting duties and tariffs imposedmay 29
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disrupt the solar panel supply chain, increase the cost for solar cells and
panels and ultimately impact the demand for clean energy solutions. We are
monitoring the investigation and any regulations issued by the
Climate Change and Effects of Seasonality
The global emphasis on climate change and reducing carbon emissions has created opportunities for our industry. Sustainability has been at the forefront of our business since its inception, and we are committed to staying at the leading edge of innovation taking place in the energy sector. We believe the next decade will be marked by dramatic changes in the power infrastructure with resources shifting to more distributed assets, storage, and microgrids to increase overall reliability and resiliency. The sustainability efforts are impacted by regulations, and changes in the regulatory climate may impact the demand for our products and offerings. For example, we have taken advantage of Investment Tax Credits for certain of our projects. See "Our business depends in part on federal, state, provincial and local government support for energy efficiency and renewable energy, and a decline in such support could harm our business" in Item 1A, Risk Factors of our Q1 2022 Form 10-Q and "Compliance with environmental laws could adversely affect our operating results" in Item 1A, Risk Factors of our 2021 Form 10-K. Climate change also brings risks, as the impacts have caused us to experience more frequent and severe weather interferences, and this trend may continue. We are subject to seasonal fluctuations and construction cycles, particularly in climates that experience colder weather during the winter months, such as the northernUnited States andCanada , and climates that experience extreme weather events, such as wildfires, storms or flooding, or at educational institutions, where large projects are typically carried out during summer months when their facilities are unoccupied. In addition, government customers, many of which have fiscal years that do not coincide with ours, typically follow annual procurement cycles and appropriate funds on a fiscal-year basis even though contract performance may take more than one year. Further, government contracting cycles can be affected by the timing of, and delays in, the legislative process related to government programs and incentives that help drive demand for energy efficiency and renewable energy projects. As a result, our revenues and operating income in the third and fourth quarter are typically higher, and our revenues and operating income in the first quarter are typically lower, than in other quarters of the year, however, this may become harder to predict with the potential effects of climate change. As a result of such fluctuations, we may occasionally experience declines in revenues or earnings as compared to the immediately preceding quarter, and comparisons of our operating results on a period-to-period basis may not be meaningful.
Our annual and quarterly financial results are also subject to significant fluctuations as a result of other factors, many of which are outside our control.
Stock-based Compensation
During the six months endedJune 30, 2022 , we granted 1,562,500 common stock options to certain employees under our 2020 Stock Incentive Plan. As a result, our unrecognized stock-based compensation expense increased from$41.1 million atDecember 31, 2021 to$51.3 million atJune 30, 2022 and is expected to be recognized over a weighted-average period of three years years. See Note 15 "Stock-based Compensation" for additional information.
Backlog and Awarded Projects
Backlog is an important metric for us because we believe strong order backlogs
indicate growing demand and a healthy business over the medium to long term,
conversely, a declining backlog could imply lower demand.
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The following table presents our backlog:
As of June 30,
(In Thousands) 2022 2021
Project Backlog
Fully-contracted backlog $ 1,002,740 $ 781,190
Awarded, not yet signed customer contracts 1,828,530 1,429,710
Total project backlog $ 2,831,270 $ 2,210,900
12-month project backlog $ 756,700 $ 606,490
O&M Backlog
Fully-contracted backlog $ 1,196,820 $ 1,121,230
12-month O&M backlog $ 73,475 $ 67,010
Our $892 million SCE Agreement was entered into in October 2021 and increased
our fully-contracted backlog for the six months ended June 30, 2022 as compared
to the six months ended June 30, 2021 . We anticipate that the SCE Agreement will
be an important driver of our results in 2022.
Total project backlog represents energy efficiency projects that are active
within our sales cycle. Our sales cycle begins with the initial contact with the
customer and ends, when successful, with a signed contract, also referred to as
fully-contracted backlog. Our sales cycle recently has been averaging 18 to 42
months. Awarded backlog is created when a potential customer awards a project to
Ameresco following a request for proposal. Once a project is awarded but not yet
contracted, we typically conduct a detailed energy audit to determine the scope
of the project as well as identify the savings that may be expected to be
generated from upgrading the customer's energy infrastructure. At this point, we
also determine the subcontractors, what equipment will be used, and assist in
arranging for third party financing, as applicable. Recently, awarded projects
have been taking an average of 12 to 24 months to result in a signed contract
and convert to fully-contracted backlog. It may take longer, as it depends on
the size and complexity of the project. Historically, approximately 90% of our
awarded backlog projects have resulted in a signed contract. After the customer
and Ameresco agree to the terms of the contract and the contract is executed,
the project moves to fully-contracted backlog. The contracts reflected in our
fully-contracted backlog typically have a construction period of 12 to 36 months
and we typically expect to recognize revenue for such contracts over the same
period.
Our O&M backlog represents expected future revenues under signed multi-year customer contracts for the delivery of O&M services, primarily for energy efficiency and renewable energy construction projects completed by us for our customers.
We define our 12-month backlog as the estimated amount of revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. See "We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts" and "In order to secure contracts for new projects, we typically face a long and variable selling cycle that requires significant resource commitments and requires a long lead time before we realize revenues" in Item 1A, Risk Factors in our 2021 Form 10-K.
Assets in Development
Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, were estimated at$1.4 billion , which includes$79.8 million attributable to a non-controlling interest atJune 30, 2022 , and$1.1 billion atJune 30, 2021 . The portion related to spending for Energy as a Service assets was approximately$60.0 million and$70.0 million atJune 30, 2022 and 2021, respectively. This is another important metric because it helps us gauge our future capacity to generate electricity or deliver renewable gas fuel which contributes to our recurring revenue stream.
Results of Operations
All financial result comparisons made below are against the same prior year period unless otherwise noted.
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The following tables set forth certain financial data from the condensed consolidated statements of income for the periods indicated:
Three Months Ended June 30,
2022 2021 Year-Over-Year Change
(In Thousands) Amount % of Revenues Amount % of Revenues Dollar Change % Change
Revenues $ 577,397 100.0 % $ 273,920 100.0 % $ 303,477 110.8 %
Cost of revenues 496,094 85.9 % 220,598 80.5 % 275,496 124.9 %
Gross profit 81,303 14.1 % 53,322 19.5 % 27,981 52.5 %
Selling, general and administrative
expenses 38,249 6.6 % 31,882 11.6 % 6,367 20.0 %
Operating income 43,054 7.5 % 21,440 7.8 % 21,614 100.8 %
Other expenses, net 5,249 0.9 % 5,450 2.0 % (201) (3.7) %
Income before income taxes 37,805 6.5 % 15,990 5.8 % 21,815 136.4 %
Income tax provision (benefit) 4,932 0.9 % (1,896) (0.7) % 6,828 (360.1) %
Net income 32,873 5.7 % 17,886 6.5 % $ 14,987 83.8 %
Net (income) loss attributable to
redeemable non-controlling interest (657) (0.1) % (4,231) (1.5) % $ 3,574 84.5 %
Net income attributable to common
shareholders $ 32,216 5.6 % $ 13,655 5.0 % $ 18,561 135.9 %
Our results of operations for the three months ended
•Revenues: total revenues for the three months endedJune 30, 2022 increased over 2021 primarily due to a$292.9 million , or 149%, increase in our project revenues attributed to the timing of revenue recognized as a result of the phase of active projects versus the prior year, including our SCE battery storage project, and a$6.0 million , or 16%, increase in our energy asset revenue attributed to the continued growth of our operating portfolio, strong renewable gas production, and higher pricing on renewable identification numbers ("RINs") generated from certain alternative fuel generation assets in operation. •Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above. Gross profit increased due to increased revenue, however, our gross profit as a percent of revenues decreased due to the higher revenue contribution from our lower margin SCE battery storage project. •Selling, General and Administrative Expenses ("SG&A"): SG&A expenses for the three months endedJune 30, 2022 increased over 2021 primarily due to higher net salaries and benefits of$4.4 million as a result of increased headcount and an increase in non-cash stock compensation expense and higher insurance costs. •Other Expenses, Net: Other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of financing costs and certain government incentives. Other expenses, net for the three months endedJune 30, 2022 decreased over 2021 primarily due to government incentive income of$2.0 million and a gain on derivatives of$1.1 million compared to a loss of$1.6 million in the prior year, partially offset by higher interest expenses of$3.3 million related to an increase in amounts outstanding on our senior secured debt facility.
•Income before Income Taxes: the increase in income before income taxes is due to reasons described above.
•Income Tax (Benefit) Provision: the provision for income taxes is based on various rates set by federal, state, provincial and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The effective tax rate was higher in 2022 as compared to 2021 primarily due to higher domestic income resulting in higher state taxes, lower levels of compensation deductions related to employee stock option exercises, and less favorable tax adjustments related to partnership flip transactions. •Net Income and Earnings Per Share: Net income attributable to common shareholders increased due to the reasons described above. Basic earnings per share for the three months endedJune 30, 2022 was$0.62 , an increase of$0.35 per share compared to the same period of 2021. Diluted earnings per share for 2022 was$0.61 , an increase of$0.35 per share compared to last year. The results for the three months endedJune 30, 2022 and 2021 reflect a non-cash downward adjustment of$0.7 million and$4.2 million , respectively, related to non-controlling interest activities. 32
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Six Months Ended June 30,
2022 2021 Year-Over-Year Change (In Thousands) Amount % of Revenues Amount % of Revenues Dollar Change % Change Revenues$ 1,051,399 100.0 %$ 526,122 100.0 % $ 525,277 99.8 % Cost of revenues 901,718 85.8 % 425,891 80.9 % 475,827 111.7 % Gross profit 149,681 14.2 % 100,231 19.1 % 49,450 49.3 % Selling, general and administrative expenses 77,941 7.4 % 60,483 11.5 % 17,458 28.9 % Operating income 71,740 6.8 % 39,748 7.6 % 31,992 80.5 % Other expenses, net 12,330 1.2 % 9,122 1.7 % 3,208 35.2 % Income before income taxes 59,410 5.7 % 30,626 5.8 % 28,784 94.0 % Income tax provision 7,239 0.7 % 309 0.1 % 6,930 2,242.7 % Net income 52,171 5.0 % 30,317 5.8 % $ 21,854 72.1 % Net (income) loss attributable to redeemable non-controlling interest (2,571) (0.2) % (5,488) (1.0) % $ 2,917 53.2 % Net income attributable to common shareholders$ 49,600 4.7 %$ 24,829 4.7 % $ 24,771 99.8 %
Our results of operations for the six months ended
•Revenues: total revenues for the six months endedJune 30, 2022 increased over 2021 primarily due to a$505.6 million , or 149%, increase in our project revenues attributed to the timing of revenue recognized as a result of the phase of active projects versus the prior year, including our SCE battery storage project. •Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above. Gross profit increased due to increased revenue, however, our gross profit as a percent of revenues decreased due to the higher revenue contribution from our lower margin SCE battery storage project. •Selling, General and Administrative Expenses ("SG&A"): SG&A expenses for the six months endedJune 30, 2022 increased over 2021 primarily due to higher net salaries and benefits of$11.7 million as a result of increased headcount and an increase in non-cash stock compensation expense. The increase is also attributed to higher miscellaneous expenses related to a settlement of an outstanding legal proceeding and higher insurance costs. •Other Expenses, Net: Other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of financing costs and certain government incentives. Other expenses, net for the six months endedJune 30, 2022 increased over 2021 primarily due to higher interest expenses of$5.0 million related to an increase in amounts outstanding on our senior secured debt facility. This was partially offset by government incentive income of$2.0 million .
•Income before Income Taxes: the increase in income before income taxes is due to reasons described above.
•Income Tax (Benefit) Provision: the provision for income taxes is based on various rates set by federal, state, provincial and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The effective tax rate was higher in 2022 as compared to 2021 primarily due to primarily due to higher domestic income resulting in higher state taxes, lower levels of compensation deductions related to employee stock option exercises, and less favorable tax adjustments related to partnership flip transactions. •Net Income and Earnings Per Share: Net income attributable to common shareholders increased due to the reasons described above. Basic earnings per share for the six months endedJune 30, 2022 was$0.96 , an increase of$0.47 per share compared to the same period of 2021. Diluted earnings per share for 2022 was$0.93 , an increase of$0.45 per share compared to last year. The results for the six months endedJune 30, 2022 and 2021 reflect a non-cash downward adjustment of$2.6 million and$5.5 million , respectively, related to non-controlling interest activities.
Business Segment Analysis
Our reportable segments for the three and six months endedJune 30, 2022 wereU.S. Regions,U.S. Federal,Canada ,Alternative Fuels (formerly Non-Solar Distributed Generation ("Non-Solar DG")) and All Other. OnJanuary 1, 2022 , we changed the structure of our internal organization and our "All Other" segment now includes ourU.S. -based enterprise energy management services previously included in ourU.S Regions segment and ourU.S. Regions segment now includesU.S. project revenue and associated costs previously included in our former Non-Solar DG segment. As a result, previously reported amounts have been reclassified for comparative purposes. These segments do not include results of other activities, such as corporate operating 33
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expenses not specifically allocated to the segments. See Note 16 "Business Segment Information" for additional information about our segments.
All financial result comparisons made below relate to both the three and six
month periods and are against the same prior year period unless otherwise noted.
Revenues
Three Months Ended June 30, Six Months Ended June 30,
(In Thousands) 2022 2021 Dollar Change % Change 2022 2021
Dollar Change % Change
U.S. Regions $ 397,385 $ 118,023 $ 279,362 236.7 % $ 711,905 $ 207,267 $ 504,638 243.5 %
U.S. Federal 101,428 90,198 11,230 12.5 177,074 192,412 (15,338) (8.0)
Canada 14,461 10,875 3,586 33.0 31,633 22,518 9,115 40.5
Alternative Fuels 29,192 26,213 2,979 11.4 58,453 51,793 6,660 12.9
All Other 34,931 28,611 6,320 22.1 72,334 52,132 20,202 38.8
Total revenues $ 577,397 $ 273,920 $ 303,477 110.8 % $ 1,051,399 $ 526,122 $ 525,277 99.8 %
•U.S. Regions: the increase is primarily due to an increase in project revenue
attributable to the timing of revenue recognized as a result of the phase of
active projects, including our SCE battery storage projects, versus the prior
year.
•U.S. Federal: the change in revenue is primarily due to the timing of project
revenue recognized as a result of the phase of active projects which were
impacted by supply chain delays during the first quarter of 2022.
•Canada: the increase is primarily due to an increase in project revenues attributable to the timing of revenue recognized as a result of the phase of active projects versus the prior year.
•Alternative Fuels: the increase is primarily attributed to higher energy asset revenues resulting from the continued growth of our operating portfolio, increased renewable gas production levels and higher pricing on RINs generated from certain alternative fuel generation assets in operation. •All Other: All other revenues increased over 2021 primarily due to higher project revenues as a result of the phase of active projects versus the prior year and an increase in integrated-PV revenue.
Income before Taxes and Unallocated Corporate Activity
Three Months Ended June 30, Six Months Ended June 30,
(In Thousands) 2022 2021 Dollar Change % Change 2022 2021 Dollar Change % Change
U.S. Regions $ 32,840 $ 7,718 $ 25,122 325.5 % $ 51,058 $ 10,957 $ 40,101 366.0 %
U.S. Federal 12,011 11,082 929 8.4 20,897 23,112 (2,215) (9.6)
Canada 1,012 749 263 35.1 1,291 664 627 94.4Alternative Fuels 6,476 4,716 1,760 37.3 13,898 13,488 410 3.0 All Other 3,139 1,817 1,322 72.8 5,848 3,462 2,386 68.9 Unallocated corporate activity (17,673) (10,092)$ (7,581) (75.1) (33,582) (21,057) (12,525) (59.5) Income before taxes$ 37,805 $ 15,990 $ 21,815 136.4 %$ 59,410 $ 30,626 $ 28,784 94.0 % •U.S. Regions: the increase is primarily due to the increase in revenues described above, partially offset by higher salaries and benefits and other expenses. •U.S. Federal: the increase for three months endedJune 30, 2022 is primarily due to increased revenues and the decrease for the six months endedJune 30, 2022 is primarily due to the decrease in revenues described above.
•Canada: the increase is primarily due to the increase in revenue described above, partially offset by higher salaries and benefits.
•Alternative Fuels: the increase is primarily due to higher revenues noted above, partially offset by increased interest expenses.
•All Other: the increase is primarily due to the increase in revenues described above.
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•Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the segments. We do not allocate any indirect expenses to the segments. Corporate activity increased primarily due to higher net salaries and benefit costs, insurance costs, and interest expenses.
Liquidity and Capital Resources
Overview
Since inception, we have funded operations primarily through cash flow from operations, advances from Federal ESPC projects, our senior secured credit facility, and various forms of other debt. In addition, inMarch 2021 , we completed an underwritten public offering of 2,875,000 shares of our Class A Common Stock, for total net proceeds of$120.1 million . See Note 7 "Debt and Financing Lease Liabilities" for additional information.
Working capital requirements, which can be susceptible to fluctuations during the year due to seasonal demands, generally result from revenue growth, our solar equipment purchase patterns, the timing of funding under various contracts, or advances from Federal ESPC projects, and payment terms for receivables and payables.
We expect to incur additional expenditures in connection with the following activities:
•equity investments, project asset acquisitions and business acquisitions that we may fund from time to time •capital investment in current and future energy assets •material, equipment, and other expenditures for our SCE battery storage project We regularly monitor and assess our ability to meet funding requirements. We believe that cash and cash equivalents, working capital and availability under our revolving senior secured credit facility, combined with our right (subject to lender consent) to increase our revolving credit facility by$100.0 million , and our general access to credit and equity markets, will be sufficient to fund our operations through at leastAugust 2023 and thereafter. We funded a significant portion of the contract expenditures for our SCE battery storage project during the six months endedJune 30, 2022 . However, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate and that we can meet our capital requirements during these uncertain times. This may include limiting discretionary spending across the organization and re-prioritizing our capital projects amid times of political unrest, the evolution of the COVID-19 pandemic, the duration of supply challenges, and the rate and duration of the inflationary pressures. For example, recent increases in inflation and interest rates have impacted overall market returns on assets. We have therefore been particularly prudent in our capital commitments over the past couple of quarters, ensuring that our assets in development continue to align with our hurdle rates.
Sources of Liquidity
Senior Secured Credit Facility
OnMarch 4, 2022 , we entered into the fifth amended and restated senior secured credit facility, which increased the aggregate amount of total commitments from$245.0 million to$495.0 million . This amendment increased the aggregate amount of the revolving commitments from$180.0 million to$200.0 million , increased the existing term loan A to$75.0 million , and extended the maturity date of the revolving commitment and term loan A fromJune 28, 2024 toMarch 4, 2025 . In addition, it added a delayed draw term loan A for up to$220.0 million through aSeptember 4, 2023 maturity date, increased the total funded debt to EBITDA covenant ratio from a maximum of 3.50 to 4.50 for the quarter endedMarch 31, 2022 ; 4.25 for the quarter endingJune 30, 2022 , 4.00 for the quarters endingSeptember 30, 2022 andDecember 31, 2022 ; and 3.50 thereafter. The amendment also specified the debt service coverage ratio to be less than 1.5 and increased our limit under an energy conversation project financing to$650.0 million , which provides us with flexibility to grow our federal business further. As ofJune 30, 2022 , the balance on the senior secured term loans was$275.0 million , the balance on the senior secured revolving credit facility was$165.0 million , and we had funds available of$19.6 million . OnJune 9, 2022 , we entered into the first amendment to the fifth amended and restated senior secured credit facility, which increased the maximum indebtedness incurred under an energy conservation project financing from$650.0 million to$725.0 million from and afterApril 1, 2022 to and includingDecember 30, 2022 .
Project Financing - Non-recourse Revolvers, Loans and Financing Facilities
We have entered into a number of construction and term loan agreements for the
purpose of constructing and owning certain renewable energy plants. While we are
required under generally accepted accounting principles ("GAAP") to reflect
these loans as liabilities on our consolidated balance sheets, they are
generally non-recourse and not direct obligations of Ameresco, Inc.
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During the six months endedJune 30, 2022 , we received gross proceeds from these non-recourse financings of$32.9 million . AtJune 30, 2022 , the balance outstanding on our non-recourse debt was$358.0 million and approximately$380.1 million remained available under these lending commitments, which expire at various dates fromJuly 2022 throughJuly 2024 . Approximately$11.5 million of this lending commitment expiredJuly 15, 2022 . We expect to renew this commitment before the end of fiscal year 2022. See Notes 6. "Leases" and 7. "Debt and Financing Lease Liabilities" for additional details.
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